Why Renters Are Winning: Don't Let Society Pressure You Into Buying A Home

The pressure on millennials and Generation Z would-be homebuyers never seems to cease. While baby-boom parents (and even grandparents) could afford down payments and mortgages on homes with relatively modest salaries, younger generations don't always share that experience. Student loan debt, slow-growing wages, and skyrocketing home and mortgage prices in a relatively tight housing market all impact younger generations and their "delaying" of homeownership today. But what if buying a home wasn't just delayed, but avoided altogether?

"Owning a home is a top financial goal for many people, but I'm not sure it should be," Lawrence Sprung, CFP, explained to Money Digest in a recent interview. Sprung is the author of "Financial Planning Made Personal," as well as the founder of Mitlin Financial. When asked about pathways to homeownership despite daunting 20% down payments and a lack of fixed-rate mortgage approvals, Sprung acknowledged that fitting the financial requirements for modern homeownership isn't for everyone.

"Whether homeownership is right for you should be evaluated from both a financial and practical standpoint," explained Sprung. While this evaluation can be a bummer for prospective homebuyers struggling to find a desirable home within their means that isn't snapped up by a cash offer far over asking, it doesn't have to be. As Sprung said, "There are advantages to buying and to renting." So let's look at some of the renter's advantages.

While it's been common cultural knowledge that paying rent isn't as smart as paying for something you can eventually own, like a house, a recent study has shown it's cheaper to rent than to own in all 50 states. While rental costs are generally up since pre-pandemic levels and outpacing wage growth in some areas, monthly rent is still cheaper than monthly housing purchase costs by about $1,000, per a rent vs. buy study by Bankrate. Further analysis of market data by experts also shows rent might stay cheaper than owning, at least for a while.

Zillow's January 2024 rental report indicates that new construction and rental deals are holding strong. While some major metro areas like New York City continue to see rising rental costs, Zillow reports monthly rent is down in 16 major metrolands, including Austin (-0.5%), San Diego (-0.4%), and Dallas (-0.3%). While producing a mortgage down payment for a home might be prohibitive for prospective buyers, pulling together rent and security deposits may be more manageable up-front costs for renters.

Another consideration is that renting doesn't carry the hidden costs of owning a home. For example, neglecting routine home maintenance can cost you, while some fun, personal renovations might later impact attempts to sell a home. On the flip side, renters can take advantage of their landlord's phone number and/or a host of home maintenance services provided by their rental building, rather than paying out of pocket for minor conveniences and major fixes, not to mention property taxes.

In today's housing market, some homeowners feel stuck in their low mortgage rates, unable to move because a new mortgage at the current rates would be less cost-effective. While this may seem like a dream problem when housing affordability is so prohibitive for first-time buyers, it's also a reminder that being able to move for work or pleasure or to upsize or downsize are part of the perks of renting.

The idea of picking up and moving to Paris might not be feasible for everyone, but it'll likely be far easier to find a rental subletter than to sell a house quickly. Changes in income are also slightly more common than romantic international relocations, and are yet another reason why it's better for many to rent than buy. Instead of being stuck with a suddenly unaffordable house payment and the looming threat of foreclosure (here's what it really means), renters can find a roommate situation or a cheaper rental option with more flexibility. On the flip side, renters who get an income boost can sign a new lease on that deluxe apartment in the sky.

In summary, don't let the thought of paying rent instead of a mortgage live rent-free in your head. Said Lawrence Sprung, "Many people aim to own a home because society tells us that's the way life should go. This makes it seem like not owning a home is a failure, but that's not true."